Research On Nonlinear Dynamics Characteristics Of RMB And International Exchange Rates

Since the 1960s has came nonlinear science which shows the features of nonlinear systems, born a new science called as Chaotic Economics, it provides economics with a new way of research. In recent years, with the development of the nonlinear financial theory and chaotic theory that many economists emphasize very much, they produce many meaningful results. From the characteristics of the exchange rate markets, to study nonlinear features of exchange rates by using the nonlinear dynamic theory and methods associated with researches on the predication of exchange rates and fluctuations of exchange rates in China's exchange rates market has practical and theoretically meanings. So, it is important to combine the advanced financial theories with RMB exchange rates.From the perspective of nonlinear dynamics, this paper chooses three RMB exchange rates and five important international exchange rates to study their nonlinearities, the purposes for which are as follows: Firstly, the development of nonlinear theory and methods influence the traditional economics. Secondly, exchange rates market is very important for economy growth, and it is difficult to explain its changes. For example, after the collapse of Bretton Woods System, many western nations give up fixed exchange rates to flexible exchange rates. Since that time, the most dramatic features shown by the financial data are the striking fluctuations in exchange rates such as US Dollar and Yen. So, it is necessary to study the laws of exchange rates time series. Thirdly, in the view of the entry of WTO, the issue of RMB exchange rates not only influences the important variables of China's economy, but also affects the world economy. And during the transmission from the plan economy to market economy, China's exchange systems are very different from that of the western world, so mastering the law of the fluctuations of RMB is benefit for the establishment of economic policies. And what's more, since July 21st 2005, China carries out the adjusted and managed flexible rates considering the monetary basket such USD, EURO, JPY and WON. Therefore, to study RMB exchange rates is very meaningful. Finally, with development and globalization of the world trade and wild increase of international capital flow, countries' exchange markets are the integral parts of the globe exchange rates system. So, it is necessary to study the nonlinearities of international exchange rates (POUND/USD, CANADA_D/USD, JPY/USD, SINGAPORE_D/USD and WON/USD) , which influence the law of RMB exchange rates.This paper consists of five parts. The 1st part mainly discusses the background of the research and the development of the international researches on exchange rates. The 2nd part introduces the theory of indirect chaotic test -Surrogate Data Method and BDS Testing, and suggests the Surrogate Data Method based on the BDS statistic. The study presents some empirical evidence on the presence of nonlinearities of five exchange rates, comparing the difference between the original data and surrogate data generated from the original and rejecting the null hypothesis in confidence coefficient 95%. The 3rd part analyzes the fractal structure of exchange rates by using the theories of R/S analysis and calculating Hurst Exponent. The 4th part discusses the chaotic analysis of the above exchange rates and discoveries that the above rates have the weak chaos phenomena. The 5th part gives the results of this research and the future research in the field.